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EMPLOYEE BENEFITS
1. Which is incorrect concerning the recognition and measurement of a defined benefit plan?
a. Actuarial assumptions are required to measure the obligation and expense and there is a possibility of
actuarial gains and losses.
b. The obligation is measured on a discounted basis.
c. The defined benefit plan must be fully funded.
d. The expense recognized for a defined benefit plan is not necessarily the amount of contribution due
for the period.
2. It is the increase in the present value of the defined benefit obligation for employee service in prior
periods, resulting from a plan amendment or curtailment.
a. Current service cost
b. Net interest
c. Past service cost
d. Employee benefit cost
3. Which of the following statements is incorrect concerning the actuarial assumptions?

a. Actuarial assumptions shall be unbiased and mutually compatible.
b. Actuarial assumptions are unbiased if they are neither imprudent nor excessively
conservative.
c. Actuarial assumptions comprise of demographic assumptions and financial assumptions.
d. Postemployment benefit obligations shall be measured on a basis that reflects current
salary and ignores future salary increases.
4. What is the treatment of actuarial gains and losses?

a. As remeasurements recognized immediately in other comprehensive income and subsequently
recycled to profit or loss.
b. As remeasurements recognized immediately in profit or loss.
c. As remeasurements recognized immediately in retained earnings.
d. As remeasurements recognized immediately in other comprehensive income and permanently
excluded from profit or loss.
5. Which of the following statements characterizes defined contribution plans?

a. Defined contribution plans are more complex in construction than defined benefit plans.
b. The employer’s obligation is satisfied by making the appropriate amount of periodic contribution.
c. The investment risk is borne by the employer.
d. Contributions are made in equal amounts by employer and employees.
ACCOUNTING FOR INCOME TAX
1. Recognizing tax benefit in a loss year due to a loss carryforward requires

a. Only a footnote disclosure.
b. Creating a new carryforward for the next year.
c. Creating a deferred tax asset.
d. Creating a deferred tax liability.
2. Which of the following is the most likely item to result in a deferred tax asset?
a. Using accelerated depreciation for tax purposes but straight line depreciation for accounting
purposes.
b. Using the cost recovery method of recognizing construction revenue for tax purposes but using
percentage of completion method for financial reporting purposes.
c. Prepaid expense
d. Unearned revenue
3. Which of the following statements in relation to deferred assets and liabilities is true?
I. Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable
temporary differences.
II. Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of
deductible permanent differences.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
4. When a change in the tax rate is enacted, the effect on existing future income tax assets or liabilities
is:
a. Recorded immediately as retroactive adjustment to retained earnings.
b. Recorded as an adjustment to income tax expense in the period of the rate change.
c. Recorded prospectively over the number of years of the change until the period in which the timing
differences are expected to reverse.
d. Not recognized until the benefit or cost of the rate change is realized when the timing differences
actually reverse.
5. All of the following are examples of temporary differences that result in taxable amounts in future
years except:
a. Installment sales
b. Holding gains
c. Long-term construction contracts
d. Subscription received in advance
6. Which of the following is not a permanent difference?

a. Fines resulting from a violation of law
b. Gold club membership dues
c. Litigation accruals
d. Proceeds of life insurance carried on key officers
7. Which entities are required to apply deferred tax accounting?
I. Public entities
II. Nonpublic entities
a. I only
b. II only
c. Both I and II
d. Neither I nor II
8. It is the amount attributable to an asset or liability for tax purposes.

a. Carrying amount
b. Tax base
c. Measurement base
d. Taxable amount
9. An entity shall offset a deferred tax asset and deferred tax liability when
I. The deferred tax asset and deferred tax liability relate to income taxes levied by the same taxing
authority.
II. The entity has a legal enforceable right to offset a current tax asset againste a current tax liability.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
10. Future deductible amounts will cause:

a. Taxable income to be more than pretax financial income in the future.
b. A decrease in pretax financial income in future years.
c. The recording of a future tax liability
d. The recording of a future tax asset
NCAFHS/DO/AC INCLUDING PRIOR PERIOD
1 . Failed to record accrued salaries at the end of an accounting period results in
Overstated Retained Earnings

2. When the current year’s beginning inventory is overstated
The cost of goods sold is overstated
3. Which of the following is not an example of an accounting error?

Recognition of gain on fully depreciated property
4.Which is the first step within the hierarchy of guidance when selecting accounting policies?
Apply standard from IFRS if it specifically relates to the transaction
5.What is the first item presented in the notes to financial statements?
Statement of compliance with IFRS
6.An entity shall disclose in the summary of significant accounting policies

The measurement basis and the accounting policies used.
7.Which is not a criterion for the sale of a noncurrent asset held for sale to be highly probable?
The sale should be expected to qualify for recognition as a completed sale within one year from the end
of reporting period.
8.An entity shall classify a noncurrent asset or disposal group as held for sale when
The carrying amount of the asset or disposal group is recovered through a sale.
9.The disclosure of accounting policies is important to financial statement readers in determining

Whether accounting policies are consistently applied from year to year.
10.Disclosure of information about key sources of estimation uncertainty and judgment
Is mandatory
9.What is the treatment if an entity has included in the consolidation this year a subsidiary that was
appropriately excluded from consolidation last year?
An accounting change that should be reported retrospectively.

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EMPLOYEE BENEFITS

3. Which of the following statements is incorrect concerning the actuarial assumptions?

4. What is the treatment of actuarial gains and losses?

5. Which of the following statements characterizes defined contribution plans?

1. Recognizing tax benefit in a loss year due to a loss carryforward requires

6. Which of the following is not a permanent difference?

8. It is the amount attributable to an asset or liability for tax purposes.

10. Future deductible amounts will cause:

1 . Failed to record accrued salaries at the end of an accounting period results in

Overstated Retained Earnings

3. Which of the following is not an example of an accounting error?

Apply standard from IFRS if it specifically relates to the transaction

5.What is the first item presented in the notes to financial statements?

Statement of compliance with IFRS

6.An entity shall disclose in the summary of significant accounting policies

9.The disclosure of accounting policies is important to financial statement readers in determining

10.Disclosure of information about key sources of estimation uncertainty and judgment

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